Nike Stock Looks Like a Winner With New, Tech-Focused CEO

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Usually, transitions in leadership at a firm aren’t exactly taken too well by shareholders. This is especially true when the departing CEO has been the main driver of the firm’s success over the years. And that’s exactly how you could sum up the market’s reaction to Nike (NYSE:NKE) CEO Mark Parker’s decision to leave. Parker has been at NKE stock’s helm for more than 13 years and has been a major force behind its continued gains, shifts in strategy and new socially-aware marketing image.

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With that, Nike stock dipped nearly 4% on the news of Parker’s unexpected departure from the athletic apparel maker.

However, that dip could be a big buying opportunity in NKE stock. Parker’s replacement happens to be a leader in the technology world across two different top-notch organizations. It also underscores Nike’s continued shift from being just a shoemaker into a leading technology firm and will expand its efforts in e-commerce.

In the end, Parker’s exodus from Nike may not be so bad after all.

The Nike CEO Shift

NKE stock investors owe a lot of the apparel maker’s success to Parker. Holding the reins since 2006, Parker has helped guide Nike through the Great Recession and was responsible for many of the firm’s moves, partnership deals and shifts in product mix. Those efforts have been widely successful. Nike has continued to see expanding sales and profits as well as a share price that has grown more than 750% since Parker has taken over.

But these days, the Nike of the future seems a bit more tech-oriented. And with a background in design — Parker started out with the firm designing sneakers — the board felt it was time to find a replacement. The man chosen for the job is John Donahoe.

The problem for many investors — as gauged by the initial big drop in Nike stock when the news was announced — is that Parker was seen as a visionary much like Steve Jobs. Just as Apple (NASDAQ:AAPL) was struggling until Jobs returned, Nike was in a bit of a hard place when Parker first crossed to the CEO role. Rivals like Under Armour (NYSE:UA, NYSE:UAA) had started to seriously eat NKE’s lunch and Parker provided the vision to get the athletic giant back on track. Heck, Parker even dresses like Jobs.

Donahoe’s resume, while impressive, doesn’t exactly scream “apparel visionary.” He was a managing director at private equity shop Bain, was eBay’s (NASDAQ:EBAY) CEO and is currently the CEO of leading cloud computing firm ServiceNow (NYSE:NOW). So again, we’re looking at more of professional manager rather than a Steve Jobs-styled figure.

It’s easy to understand why NKE shareholders were a bit shaken by the sudden transfer of power.

The Switch Is Great for Nike Stock

While Donahoe may seem boring, the switch could bear plenty of real fruit for NKE. The reason is all about technology.

Thanks to the rise of digitally native brands, e-commerce and subscription services, Nike was forced to switch focus to stay relevant in the new age. Towards the end of his run, Parker has invested aggressively in driving that digital growth at Nike. This has meant beefing up its apps and online presence as well as scooping up consumer data and analytics company Zodiac and predictive analytics firm Celect. Nike has also launched several loyalty programs for its most fanatical fans such as Nike+ and SNKRS.

Those efforts have been working. Nike managed to see a 42% jump in digital sales during its last reported quarter. Additionally, those digital sales have helped strengthen Nike’s profit margins and boost overall revenues.

This is where Donahoe comes in. Given his background in subscription products at NOW as well as his focus on e-commerce at eBay and PayPal (NASDAQ:PYPL), Nike has the potential to keep the digital transformation going. Parker was great, but he’s no tech guy. You can only take a business so far when it’s not your specialty. But Donahoe could be exactly what the firm needs to move forward. In addition to more consumer-focused products and designs, Nike will be able to comb through all the data it generates from apps like Nike Running, improve its supply chain further and continue to innovate in the space.

In the end, Nike will be a tech stock that just happens to sell shoes.

Buy NKE Stock

While it’s too early to tell what Donahoe’s exact moves will be — he won’t take over until the beginning of 2020 — the prognosis is still good. Given his pedigree at ServiceNow, eBay and PayPal, he should be able to move Nike further down the digital road. That should excite Nike stock investors. And if you need confirmation of that fact, just look at how NOW shareholders reacted when he left. Shares of NOW plunged over 8% on the news. Clearly, Donahoe’s role as a digital leader at a company is valuable.

The initial reaction of NKE should have been one of cheering rather than disappointment.

And in that, the dip could be a great place to start buying shares. Over the long haul, NKE has plenty of growth left and with a new digital-focused CEO at the wheel, that potential can be realized further.

 At the time of writing, Aaron Levitt did not hold a position in any stock mentioned.

Aaron Levitt is an investment journalist living in Ohio. With nearly two decades of experience, his work appears in several high-profile publications in both print and on the web. Also likes a good Reuben sandwich. Follow his picks and pans on Twitter at @AaronLevitt.


Article printed from InvestorPlace Media, https://investorplace.com/2019/10/nike-stock-looks-like-a-winner-with-new-tech-focused-ceo/.

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